"I think where they've really become more concerned is with respect to the non-mining parts of the economy," he said.

"I guess the concern on the part of the Reserve Bank and myself is that the reaction to lower interest rates has been subpar, and therefore we might go through a bit of an airpocket in the Australian economy over the next six months."

He said that with a more positive global outlook, the risks had begun to shift to the domestic economy.

"With global conditions improving, China looking stronger, share markets up, house prices starting to rise and the cash rate having fallen by 175 basis points we are likely nearing the end of the easing cycle," Dr Oliver said.

"However, another couple of rate cuts taking the cash rate to 2.5 per cent are still likely to be required."

The central bank said consumer price index (CPI) inflation is expected to be between two to three per cent in 2013, matching the RBA's target range for annual inflation.

It added that its four cash rate cuts in 2012 are only starting to have the desired effect on the economy.

"The current inflation outlook would afford scope to ease policy further, should that be necessary to support demand," the RBA said.

Inflation for 2012 was 2.2 per cent.

RBC Capital Markets senior economist Su-Lin Ong said upcoming economic data will be a key factor in finding out the timing of the next RBA rate cut.

She said the key releases will be the wage prices index for the December quarter on February 20 and capital expenditure (capex) figures, due out on February 28.

"In capex in particular we'll get the first part of the spending plans for 2013 and 2014," she said.

"This idea is that the investment pipeline is still strong at the moment but is likely to peak, we'll get a better feel of that from the capex numbers."

Ms Ong said a raft of weak domestic economic numbers will increase the possibility of a March rate cut, but she thinks the RBA will wait until the second quarter of 2013 before it moves.

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